A personal loan is an outstanding way to get cash fast for just about any purpose. But you don’t want to hurt your credit score by having your credit pulled too many times.

A personal loan can be a great way to consolidate credit card debt or finance large purchases with a predictable monthly payment. But with interest rates ranging from single digits all the way up to 30% or more, you don’t want to tarnish your credit score applying for multiple loans only to discover you’re not qualified for an affordable rate. Fortunately, more personal loan lenders are making it easy to pre-qualify for a personal loan without affecting your credit score.

When you pre-qualify for a personal loan, a lender can show you your best interest rate and monthly payment amount without needing to do a hard inquiry on your credit report. (The concern, of course, is that too many hard credit pulls will cause your score to drop, making it harder to get approved for credit in the future).

With an actual interest rate and payment quote, you’ll be able to see whether the loan fits into your budget and make an educated decision before you borrow the funds.

Pre-qualification is fast, easy, and free: what you need to pre-qualify for a personal loan

How To Pre-Qualify For A Personal Loan: How To Check Your Rate Without Affecting Your Credit - Pre-qualification is fast, easy, and free: what you need to pre-qualify for a personal loan

When you find a personal loan lender you want to work with (I’ll discuss lenders in-depth below), you’ll need to provide them with some information about your overall financial profile.

The process starts with completing an application, which can almost always be done online. That’s an advantage for you because you can fill out the application at home or at work, and on your own schedule. It also makes it easy for you to have any necessary information or documentation at your fingertips while completing the application.

The lenders in the table below are prime examples of some great online lenders:

Personal loan pre-qualification should always be free—if a lender wants to charge you a fee, run—and you can provide all the information online or over the phone.

One quick note here: if a personal loan lender requires you to complete an application through a phone process, be careful! Most lenders have automated the process through online applications. But a phone application might be an attempt by the lender to hook you up with a sales agent. That person may work to persuade you to make an application for a loan that’s either more expensive than it needs to be or doesn’t entirely meet your needs.

Completing the application

In completing an application, you should be prepared to supply information about the following:

  • Personal information. This will include your name, date of birth, home address, phone number, and email address. Your Social Security number will be requested, under either personal information or employment.
  • Loan information. This is information relating to the specific loan you’re applying for. Be prepared to provide the loan amount you need and the general purpose for the proceeds.
  • Your estimated credit score. The score you enter should be the most recent one you’ve accessed. That can be one supplied by your bank or credit card provider, or even from a free credit score source. But be aware that free credit scores may not match the one the lender will obtain.
  • Housing information. You’ll need to indicate if you own or rent. Expect to provide your monthly housing payment, as well as the length of time at the address listed. (The application will likely request previous housing information if you have lived at your current address for less than two years).
  • Employment. You’ll need to indicate if you are employed, self-employed, or retired. Be ready to provide your income as well, which should be your gross (before tax) income.
  • Debt info. Though not all applications will require it, you should be prepared to supply debt information as well. That can include the balance on your mortgage and the monthly payment and amounts owed on student loans, car loans, and even credit cards. Many lenders won’t request this information, but it’s best to be prepared just in case they do.

Avoiding the credit hit when applying for a personal loan

As I mentioned before, there’s no hard pull on your credit report, at least not with the personal loan lenders I’ve included in this guide. But there is a soft pull. To get the most accurate numbers, lenders will have to know a little about your credit history, just nothing too in-depth.

This is where the soft credit pull comes into play. Another common example of a soft credit inquiry is when you check your own credit score. You can check your own credit score as often as you’d like, but it will never appear on your report as a hard inquiry. Lenders will do something similar, checking only your credit score. Because they don’t actually pull your credit report, no inquiry will appear on your report after the fact. This will give the lender a read on your credit score but leave your score unaffected by the pull.

Credit pulls actually occur more than you probably realize. You know all those annoying credit card offers you get in the mail? The card company likely did a soft pull to see if you even qualify for the card. Sometimes, employers even do a soft credit pull to see if you’ve got a responsible credit history.

The soft credit pull will apply only to the pre-qualification phase. That will give you an opportunity to make applications with multiple lenders without hurting your credit score.

Though all lenders handle the application and soft credit pull process a bit differently, the description above certainly applies to personal loan sources like FionaCredibleand Monevo. Since each is an online personal loan marketplace, a soft pull is all that’s necessary to start the process.

Once you decide to go ahead with an application for a specific loan, the lender you’re applying with will ultimately do a hard credit pull. But that won’t be a problem, because the credit report and score they’ll access won’t reflect their hard inquiry when they do.

Why you want to pre-qualify for a personal loan

How To Pre-Qualify For A Personal Loan: How To Check Your Rate Without Affecting Your Credit - Why you want to pre-qualify for a personal loan

Pre-qualifying for a personal loan is the very first step in figuring out what loan options work best for you. It’s an overall picture of where you stand.

However, since there’s not a hard pull on your credit report, the numbers lenders give you are subject to change—although lenders’ algorithms are getting so good, it’s unlikely that the change will be significant.

Your credit and credit score situations aside, it’s important to be as accurate as possible with the information you’re providing in your application. Part of the reason for having documentation handy is to provide realistic numbers. For example, if you estimate your income on the high side, but lowball your monthly house payment (i.e., a payment of $1,599 per month is entered as $1,500 even), the final rate you’re given by the lender may be higher than the initial offer.

That leads us to the difference between being pre-approved versus pre-qualifying.

Applying for a loan triggers the hard inquiry

Before you request a personal loan pre-qualification, make sure that you’re beginning a pre-qualification process and not the process of beginning to apply. A lender that offers pre-qualification will always say something like, “See your rate without affecting your credit score.”

Although the personal loan application will look very similar to a pre-qualification form, you may have to go into more detail regarding your financial and employment history. Typically, you’ll have to click a consent form before the lender does a hard credit inquiry, but this fact can get lost in the fine print.

Finally, keep in mind that pre-approval and pre-qualification can sometimes mean different things. When you apply for a mortgage, for example, a pre-approval is a more comprehensive step than a pre-qualification and may involve a hard credit pull. When it comes to personal loans, the two terms may be used interchangeably, so always read the fine print.

Where to find personal loans

Getting back to personal loans, now that you know what pre-qualifying is, you probably want to know where to look for lenders. Below are some of the best places to start. 

  • Fiona is a little different from the others on the list because it’s not an actual loan provider. Fiona is basically an aggregator that finds the best loan for you based on your situation and needs.
  • Credible offers a simple, one-page application that will then show you your best rates based on the information you provide. Credible offers personal loan rates starting at 4.99% APR (with AutoPay), See Terms*
  • Prosper is a marketplace lending network, meaning your loan will come from dozens of individual investors rather than from a bank. There are pros and cons to this model, but one of the largest pros is that a site like Prosper may be able to approve borrowers with credit issues that a typical bank will reject. 
  • SoFi is another lender to consider that offers pre-qualification and is offering some great interest rates in the personal loan space. SoFi can offer some very competitive APRs to borrowers with excellent credit. You should also check them out if you’re a recent graduate with a good job but don’t yet have a robust credit report. SoFi can do some things in their underwriting that can help compensate for a short credit history. 
  • Monevo is an online personal loan marketplace that’s completely free to use. Monevo enables you to shop for a personal loan – and get loan quotes – without a hard credit pull that might lower your credit score. Loan amounts are available for any purpose and in amounts ranging from $1,000 to as much as $100,000, with rates between 2.49% - 35.99% APR

Related: compare Money Under 30’s recommended personal loans.

FAQs

Though many personal loan lenders don’t allow loan proceeds to be used to refinance student loans, they can be used for just about any other purpose. Debt consolidation and paying off high interest credit cards are the most common purposes, but they’re hardly the only ones. You can also use the proceeds to buy a car, pay for a wedding or vacation, cover medical expenses, or renovate your home. And that’s the short list! One of the more interesting purposes for personal loans is business financing. This particular type of financing is especially difficult to get for new business startups. But you can use a personal loan to finance your startup, or even provide additional capital for an existing business.
There’s no easy answer to the question because each lender has its own pricing algorithm. That algorithm will take into account your credit score, the stability of your income, and your debt-to-income ratios. However, additional information will be considered, including the purpose of your loan, the repayment term of the loan, and the loan amount. Pre-qualification will get you a very close approximation of the rate you’ll pay. But you won’t know specifically what the rate will be until the loan has been fully underwritten and all factors have been taken into consideration.
Many personal loan lenders have gotten away from loan fees. As such, it’s unlikely you’ll be asked to pay for an application or document preparation fee. However, one fee common with personal loans is an origination fee. Nearly all personal loans have this fee, but how much you’ll pay will depend on your credit profile and the loan you are applying for. Origination fees can range from a low of 1% of the loan amount, to as much as 8%. If you have a high credit score, stable employment and low debt-to-income ratios, the origination fee will be on the lower end of the range. For lower credit scores and higher debt-to-income ratios, expect to be on the higher range. An origination fee should be paid only when your loan closes and funds. It is not designed to be a fee you need to pay out-of-pocket in advance. The fee will be deducted from the loan proceeds at the time of funding. For example, a 5% origination fee on a $10,000 loan means you will receive $9, 500 in proceeds after the origination fee is deducted.
In many cases, a personal loan is being used specifically to pay off high interest credit cards. It may even be used to consolidate several credit cards into a single loan. Even if the interest rate on the personal loan is no lower than the average rate being charged on the credit cards being paid off, a personal loan still has the advantage of being an exit strategy for credit card debt. That’s because credit cards are based on the revolving credit repayment basis. You borrow, repay, but continue to borrow. The net result is one or more credit card balances that never seem to go away. But because personal loans are term loans, set for anywhere between one year and seven years typically, the debt will be completely repaid at the end of the term. That’s an outcome that almost never happens with credit cards. Still another advantage personal loans have over credit cards is a fixed interest rate and monthly payment. Buried in the fine print of credit card user agreements is language that enables the credit card company to raise the rate you’re paying. That’s another common feature of revolving credit arrangements. If the prime lending rate goes up, or if the lender increases the margin they charge on their credit cards, your rate will go up. What’s more, credit card companies routinely raise interest rates if you have a late payment or if your credit score falls significantly. That won’t happen with a personal loan, since the rate is fixed at the time the loan is funded.

Summary

Pre-qualifying for a personal loan can show you what your best options are, and, in most cases, it’s 100% free to do so. All you need to know is some basics about your finances and you can see what personal loans offer the best rates.

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About the author

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Christopher Murray is a professional personal finance and sustainability writer who enjoys writing about everything from budgeting to unique investing options like SRI and cryptocurrency. He also focuses on how sustainability is the best savings tool around. You can find his work on sites like MoneyGeek, Money Under 30, Investor Junkie, MoneyCrashers, and Time. You can find out more about Christopher on his website or via LinkedIn.